Our equity compensation plans provide for the grant of incentive and nonqualified stock options, as well as other stock-based awards including restricted stock and restricted stock units, to employees, non-employee directors and other consultants who provide services to us. Restricted stock awards result in the issuance of new shares when granted. For other stock-based awards, new shares are issued when the award is exercised, vested or released according to the terms of the agreement. In January 2018 and February 2017, 1,027,620 and 1,024,868 additional shares, respectively, were reserved for future issuance under our 2010 Equity Incentive Plan. At December 31, 2018, there were approximately 5.3 million shares available for grant under approved equity compensation plans.

We recorded stock-based compensation expense of $12.5 million, $12.7 million and $8.0 million for the years ended December 31, 2018, 2017 and 2016, respectively. During the year ended December 31, 2017, stock-based compensation expense included a one-time $3.6 million charge due to a modification to our Chief Executive Officer’s employment agreement which resulted in immediate vesting, and expensing, of his outstanding stock-based compensation awards based on his retirement eligibility. Stock-based compensation expense was allocated as follows (in thousands):

	Year Ended December 31,
	2018		2017		2016
Cost of revenues	$	2,168	$	1,887	$	1,309
Operating expenses
Sales and marketing		2,675		2,197		2,412
Research and development		1,505		949		618
General and administrative		6,162		7,694		3,684
Total stock-based compensation expense	$	12,510	$	12,727	$	8,023

	Year Ended December 31,
	2018		2017		2016
Stock Options	$	3,355	$	5,223	$	3,777
Performance Share Units		1,034		—		—
Restricted Stock Units		5,930		6,526		3,386
Restricted Stock Awards		487		318		308
Employee Stock Purchase Plan		466		660		552
401K Stock Match		1,238		—		—
Total stock-based compensation expense	$	12,510	$	12,727	$	8,023

As of December 31, 2018, there was approximately $13.6 million of unrecognized stock-based compensation expense under our equity compensation plans, which is expected to be recognized on a straight-line basis over a weighted-average period of 2.3 years.

Stock options generally vest over four years and have a contractual term of seven to ten years from the date of grant. Our stock option activity was as follows:

				Weighted Average
	Options			Exercise Price
	(#)			($/share)
Outstanding at December 31, 2015		943,103		$	37.91
Granted		340,609			48.58
Exercised		(221,630	)		19.42
Forfeited		(46,070	)		55.58
Outstanding at December 31, 2016		1,016,012			44.72
Granted		172,697			55.87
Exercised		(65,502	)		21.53
Forfeited		(25,876	)		55.93
Outstanding at December 31, 2017		1,097,331			47.60
Granted		181,472			59.88
Exercised		(344,334	)		41.66
Forfeited		(61,235	)		56.67
Outstanding at December 31, 2018		873,234			51.86

Of the total outstanding options at December 31, 2018, 576,842 were exercisable with a weighted average exercise price of $50.10 per share. The total outstanding options had a weighted average remaining contractual life of 4.0 years.

The fair value of options that vested during the years ended December 31, 2018, 2017 and 2016 was $3.7 million, $4.2 million and $3.4 million, respectively.

The intrinsic value of options exercised during the years ended December 31, 2018, 2017 and 2016 was $14.9 million, $2.8 million and $8.6 million, respectively. The intrinsic value of outstanding options at December 31, 2018, 2017 and 2016 was $26.7 million, $7.3 million and $25.6 million, respectively.

The weighted-average fair values per share of options granted during the years ended December 31, 2018, 2017 and 2016 were $19.48, $18.85 and $16.13, respectively. The fair values of the options granted were estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

	Year Ended December 31,
	2018			2017			2016
Volatility		35	%		38	%		38	%
Dividend yield		—			—			—
Life (in years)		4.44			4.51			4.54
Risk-free interest rate		2.54	%		1.85	%		1.19	%

The expected volatility of the options is based on the historical volatility of our common stock. We have not issued dividends on our common stock and do not expect to do so in the foreseeable future. The expected term of the options is based on the simplified method which does not consider historical employee exercise behavior. The risk-free interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected life at the grant date.

In February 2018, our executive officers were granted performance share unit (“PSU”) awards with vesting contingent on the Company’s total shareholder return as compared to indexed total shareholder return over the course of a three-year performance period (fiscal years 2018 – 2020). The grant date fair value was estimated using a Monte Carlo simulation that utilizes multiple input variables that determine the probability of satisfying the performance conditions stipulated in the award and calculates the fair market value for the performance stock units granted. Expense is recognized on a straight-line basis over the vesting period, regardless of whether the market condition is satisfied as the likelihood of the market condition being met is included in the fair-value measurement of the award.

In February 2017, our executive officers were granted PSU awards with vesting contingent on successful attainment of pre-determined revenue targets over the course of a three-year performance period (fiscal 2017 – 2019). The fair value is measured as the number of performance shares expected to be earned multiplied by the grant date fair value of our shares. The number of performance shares expected to vest during the current service period is estimated and the fair value of those shares is recognized over the remaining service period less any amounts already recognized.

Restricted stock units (“RSU”) vest over four years and, upon vesting, the holder is entitled to receive shares of our common stock. With restricted stock awards (“RSA”), shares of our common stock are issued when the award is granted and the restrictions lapse over one year.

				Weighted Average
	PSUs and RSUs			Grant Date Fair
	(#)			Value ($/share)
Outstanding at December 31, 2015		140,565		$	56.88
Granted		115,896			48.32
Vested and common stock issued		(52,133	)		48.19
Forfeited		(15,286	)		55.48
Outstanding at December 31, 2016		189,042			54.14
Granted		211,168			55.62
Vested and common stock issued		(64,950	)		53.64
Forfeited		(13,348	)		55.39
Outstanding at December 31, 2017		321,912			55.16
Granted		172,795			66.03
Vested and common stock issued		(81,561	)		56.32
Forfeited		(35,811	)		55.04
Outstanding at December 31, 2018		377,335			59.90

The number of PSUs and RSUs outstanding at December 31, 2018 included 54,688 units that have vested, but the shares of common stock have not yet been issued pursuant to the terms of the agreement.

				Weighted Average
	RSAs			Grant Date Fair
	(#)			Value ($/share)
Outstanding at December 31, 2015		1,032		$	67.39
Restricted common stock issued		6,078			52.27
Restrictions lapsed		(5,586	)		55.06
Outstanding at December 31, 2016		1,524			52.28
Restricted common stock issued		5,454			58.29
Restrictions lapsed		(5,610	)		56.65
Outstanding at December 31, 2017		1,368			58.29
Restricted common stock issued		7,304			74.43
Restrictions lapsed		(6,840	)		71.20
Outstanding at December 31, 2018		1,832			74.44

We have an employee stock purchase plan which allows participating employees to purchase shares of our common stock at a discount through payroll deductions. The plan is available to all employees subject to certain eligibility requirements. Participating employees may purchase common stock, on a voluntary after tax basis, at a price that is the lower of 85% of the fair market value of one share of common stock at the beginning or end of each stock purchase period. The plan consists of two six-month offering periods, beginning on January 1 and July 1 of each calendar year. A total of 1.0 million shares of common stock are remaining for issuance under the plan.

For the offering periods in the years ended December 31, 2018, 2017 and 2016, we withheld approximately $1.7 million, $1.9 million and $1.7 million, respectively, from employees participating in the plan and purchased 34,798 shares, 40,968 shares and 33,357 shares, respectively, on their behalf.

For the years ended December 31, 2018, 2017 and 2016, we recorded approximately $0.5 million, $0.7 million and $0.6 million, respectively, of stock-based compensation expense associated with the employee stock purchase plan. The fair value was estimated based on the market price of our common stock at the beginning of each offering period and using the Black-Scholes option pricing model with the following weighted-average assumptions:

	Year Ended December 31,
	2018			2017			2016
Volatility		26	%		32	%		37	%
Dividend yield		—			—			—
Life (in years)		0.50			0.50			0.50
Risk-free interest rate		1.77	%		0.90	%		0.42	%